If Canada, with flexible exchange rates, has lower inflation than the US, we would expect the Canadian dollar to __________ .
A) be in short supply
B) appreciate
C) depreciate
D) revalue

Question

Quizplus · Accepted Answer

When a country has lower inflation compared to another, its currency typically appreciates in value because its purchasing power increases relative to the other currency. This is because lower inflation rates make a country's goods and services cheaper for foreigners, increasing demand for the currency to buy those goods and services.

If Canada, with Flexible Exchange Rates, Has Lower Inflation Than